New Development Bank to issue first loan in Chinese currency

(From left) K.V. Kamath, president of the New Development Bank, Chinese Finance Minister Lou Jiwei and Shanghai Mayor Yang Xiong attend the opening ceremony of the New Development Bank in Shanghai, China, 21 July 2015. Source: AP

The BRICS bank’s president K. V. Kamath told Outlook magazine that the New Development Bank could cooperate with the China-led Asian Infrastructure Investment Bank on some projects.

The New Development Bank (NDB), which is run by the BRICS countries, will issue its first loan in April 2016 in Chinese Renminbi, the bank’s president K. V. Kamath was cited as saying by Outlook magazine.

The agreement to set up the New Development Bank was signed during the sixth BRICS summit in Brazil in July 2014.

NDB’s main purpose is to finance infrastructure projects and support sustainable development within the BRICS and in other emerging and developing economies.

“First of all, it will not create strict political conditions for giving loans. Moreover, it will primarily finance infrastructure and other development projects of the BRICS countries,” Sergei Luzyanin, acting director of the Institute of Far Eastern Studies of the Russian Academy of Sciences told RBTH. He said the NDB’s actions “indicate the birth of a new non-Western financial model.”

“The launch of the New Development Bank is an attempt to create an alternative or at least parallel financial system to the existing dollar one, and the first loan in yuan is a sign of this trend,” he said.

The NDB’s opening ceremony was held in July 2015 in Shanghai, where the bank’s headquarters are located. The NDB will have an initial authorized capital of $100 billion and initial subscribed capital of $50 billion, equally distributed among founding members.

The BRICS bank is launched as an alternative to existing multilateral institutions such as the World Bank and International Monetary Fund.

Outlook magazine cited Kamath as saying that the NDB was not a rival of the Asian Infrastructure Investment Bank (AIIB). He added that the two institutions could cooperate in some projects.

“The issue of cooperation between the NDB and AIIB was on the agenda during the SCO and BRICS twin summits in Ufa this month,” Luzyanin told Kommersant. “It was decided that there would be cooperation on the some specific projects. The fact is that AIIB is a much bigger organization,” he said, adding that most of their projects would be mutually exclusive.